Although the economy has improved over the last few years, it still isn’t as stable as it once was. Companies can’t or won’t always hold onto their employees, and while searching for a secure job, unemployment is the only option. One issue that people face is the necessity of a reliable vehicle. Not only is it important for getting to job interviews, it will be essential to that future employment. The question becomes whether you are able to even by a car if you’re on unemployment.
Getting a Car Loan while on Unemployment: Tough, but not Impossible
Luckily, it is not completely impossible to get a car loan if you’re on unemployment. That doesn’t mean it’s as simple as if you did have a job. The key is coming into the situation prepared. The information you have is going to be essential, plus it will be beneficial if you have a few things going for you. Here are some things to look at to see if you can find a way to qualify for a loan while on unemployment:
- Down Payment: A substantial down payment can go a long way in easing the blow that you currently have no job. Many auto dealers look at that initial lump as security—if you’re able to pay 20% or more, you are someone who can save, and takes money seriously.
- Credit: If you have a good to very good score, chances are there will be someone out there willing to take a chance on you. You have a number that proves your ability to responsibly handle money. The higher the score, the better the interest rate will be. However, don’t despair if that number is less than attractive.
- Co-Signer: Do you have someone willing to back you up? Do they know you’re good for a car loan? A co-signer will ease many lenders’ fears—and the better the co-signers credit is, the more attractive this option is for them. This option is particularly valid if you don’t have a huge down payment amount.
- Alternative Income: While unemployment is one form of income, if you have a secondary source, that may help your cause even more. Income from retirement pensions, social security, disability or some other source will be attractive for many lenders. Also, get creative with your funds for a down payment. Most people have things they can sell, or small jobs they can do that can earn a little extra cash. If you already have a car, think about selling it yourself. By eliminating a middle man, you can usually get a little more for your vehicle.
Gather Information
Another way you can prove your auto loan worthiness is to come prepared. You’ll want to gather some information for the prospective lender. One of the first things you’ll want to offer them is proof of residence. In fact, the longer you’ve lived somewhere, the better. If you can prove you’ve been a reliable renter/owner for over a year, that will go a long way in showing you’re lower risk for defaulting on a loan.
Some other beneficial information to bring with you are things like how many weeks of unemployment you have left, a list of monthly bills and proof that you understand what you can afford. Look carefully at your financial state before sitting down with a lender. Research what amount is within reach on unemployment. Lenders like when people have taken a thorough look at what won’t put too much pressure on them, and know what they can realistically pay back in the situation they are currently in—not their future situation.
Bad Credit Auto Loans
One last possibility for those on unemployment is a bad credit auto loan. It’s true—the interest rate will most likely be higher, but it may be the thing you need to do to get into a car. Often, lenders that are familiar with people dealing with tough times are able to help when traditional lenders can’t.
Like it or not, cars are an essential part of everyday life. Even those on unemployment need them—sometimes even more so. Take a few easy steps, and you’ll most likely be able to get a reliable vehicle that can get you to interviews, and eventually to your new job.
